Rates Jump After Dour Inflation Data

Tough inflation data led to mortgage rates increasing for a second straight week.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.77%, up from the week prior’s 6.64%. A year ago at this time, the 30-year FRM averaged 6.32%.

The 15-year fixed jumped to 6.12% from 5.90%. A year ago, it averaged 5.51%.

“On the heels of consumer prices rising more than expected, mortgage rates increased this week,” said Sam Khater, Freddie Mac’s Chief Economist. 

“The economy has been performing well so far this year and rates may stay higher for longer, potentially slowing the spring homebuying season. According to our data, mortgage applications to buy a home so far in 2024 are down in more than half of all states compared to a year earlier.”

January’s Consumer Price Index grew by 0.3% month-over-month and 3.1% YOY, more than analysts expected and a blow to the Fed’s inflation fight. Wall Street no longer expects March rate cuts from the Central Bank and instead assumes movement later in the year.

“Rate cuts that the market expected in the first half of this year may simply not materialize because strong January economic data raised the risk that disinflation could be stalling,” Orphe Divounguy, a senior economist at Zillow, said.

Rates aren’t the only thing blocking Americans from the housing market, but they do have an outsized impact on buyers’ moods. Still, even when rates were trending down, home prices were being supercharged by a lack of inventory, forcing affordability to hover at a decade-low.

Just 37.7% of new and existing homes sold in the same period were priced within reach of families earning $96,300, the median American income.

“Buyers and sellers came off the sidelines in December when the Fed signaled it would lower interest rates three times in the next year, but now some are getting cold feet because the Fed indicated that rate cuts may come later than expected,” said Hal Bennett, a Redfin real estate agent in Washington, noted.

“April, at the absolutely earliest, is when I think things could take off.”

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